Talks involving unions and management at ESB over a €511 million pension deficit and an increased employee shareholding have collapsed and industrial action may now follow.

The ESB group of unions will meet next Thursday and a proposal to ballot members for industrial action is likely to be discussed.

The talks at Portumna, Co Galway, ended after unions rejected a management proposal to sell some ESB plants. The talks were chaired by the former ICTU general secretary, Mr Peter Cassells.

Management proposed the sell-off plan as a way to address ESB dominance in the market. The Government has indicated that if ESB tackles this dominance, there might be a way to reward staff with a larger shareholding.

However, the Minister for Communications, Mr Dempsey, has warned that unless there is some kind of "transaction" there is no chance of staff getting a larger share in the company.

A union statement yesterday said: "The ESB group of unions wish it to be very clearly understood that there is no basis for continued discussions while the ESB maintains this position."

A spokesman for management said it was disappointed the talks had ended, but management was prepared for further engagement with Mr Cassells. Mr Paddy Reilly, chairman of the group of unions, said he was very disappointed with the lack of progress.

The ESB's pension deficit, estimated at €511 million, has caused a major problem at the company. Because the deficit is so large any superannuated pay increases could increase the hole significantly.

Consequently, ESB unions have been seeking to increase their staff shareholding from 5 per cent to almost 20 per cent.

However, yesterday ESB deputy chairman, Mr Joe La Cumbre, a worker director, said the best way to tackle the pension deficit was for ESB to stop paying dividends to the Government.

"My advice at the moment is that it could be regarded as illegal for a company with such stated liabilities to pay out a dividend," he said. "Obviously that dividend to Government and staff, which could perhaps be in excess of €70 million, I would argue should now properly be paid off the overall pension deficit of €511 and each subsequent year until the deficit is eliminated," he said.

Mr Le Cumbre said he would be discussing these issues at board level and he would not be "dissuaded easily".

It is understood unions and management at the talks in Portumna could not agree on who should cover the pension deficit. While some union members support workers increasing their contribution in some way, most believe the company should pay at least two-thirds of the deficit.